S&P 500 Rises as Heinz Deal Overshadows Economic Concern

Feb. 14 (Bloomberg) -- The Standard & Poor’s 500 Index
climbed to a five-year high as a drop in jobless claims and
Warren Buffett’s deal for H.J. Heinz Co. overshadowed concern
over shrinking economies in Europe and Japan.

Heinz surged 20 percent after Buffett’s Berkshire Hathaway
Inc. and 3G Capital agreed to buy the company in a deal valued
at about $23 billion. Constellation Brands Inc. soared 37
percent after Anheuser-Busch InBev NV offered to cede full
control of U.S. distribution for Corona beer in a bid to salvage
its deal for Grupo Modelo. US Airways Group Inc. dropped 4.6
percent after agreeing to an $11 billion merger with AMR Corp.’s
American Airlines.

The S&P 500 rose 0.1 percent to 1,521.38 at 4 p.m. in New
York. The Dow Jones Industrial Average dropped 9.52 points, or
0.1 percent, to 13,973.39. About 6.4 billion shares traded hands
on U.S. exchanges today, 4.1 percent above the three-month
average.

“Corporate America is a little more optimistic,” Ted
Harper, who helps manage about $8 billion for Frost Investment
Advisors LLC in Houston, said by phone. “Companies have
repositioned, they have become far leaner and are looking for
opportunities to deploy capital incrementally for growth.”

Global economic data today showed the recession in the euro
area deepened, with the worst performance in almost four years.
In Japan, gross domestic product shrank an annualized 0.4
percent, amid falling exports and a business-investment slump.

Equities erased early losses as Labor Department figures
showed U.S. jobless claims decreased by 27,000, the most in a
month, to 341,000 in the week ended Feb. 9. The level of filings
trailed any projection in a Bloomberg survey in which the median
forecast was 360,000.

Fed Stimulus

The S&P 500 has climbed 6.7 percent in 2013 as U.S.
lawmakers reached a budget compromise. It has more than doubled
since bottoming in March 2009 as the Federal Reserve conducted
three rounds of bond buying to lower interest rates and boost
economic growth.

Seven out of 10 groups in the benchmark index advanced
today as energy companies gained the most, rising 0.5 percent.
The Chicago Board Options Exchange Volatility Index, which
measures the cost of using options as insurance against declines
in the S&P 500, fell 2.5 percent to 12.66.

Heinz rallied $12.02 to $72.50 and Berkshire Hathaway’s
Class A shares jumped 1 percent to $149,240. Both companies
closed at a record high.

Heinz Deal

Buffett’s Berkshire and 3G Capital agreed to buy Heinz as
the billionaire chairman increases his bets on consumer
products. The buyers will pay $72.50 a share, compared with
yesterday’s closing price of $60.48, according to a statement.
The deal is valued at about $28 billion including debt.

Constellation surged $11.87 to a record $43.75. InBev, the
world’s biggest brewer, offered to cede full control of Corona
distribution in the U.S. to Constellation for $2.9 billion after
U.S. regulators sued to block its purchase of Grupo Modelo.
Constellation will gain Modelo’s brewery in Piedras Negras,
which is located in Mexico near the Texas border, and perpetual
rights for the Corona and Modelo brands in the U.S., Leuven,
Belgium-based AB InBev said.

US Airways slipped 67 cents to $13.99 after the company
said it will combine with AMR’s American Airlines to create the
world’s largest carrier. AMR’s bankruptcy creditors will own 72
percent of the new company, and US Airways stockholders will get
28 percent.

M&A Activity

About $36 billion in deals were announced in the U.S.
today, bringing the total to $145.8 billion so far this year,
according to data compiled by Bloomberg. That already surpassed
the total of $99.6 billion during the first two months of 2012.

“We’re positive on the fact that M&A will continue to move
higher,” said Jeff Morris, the Boston-based head of U.S.
equities for Standard Life Investments, in a phone interview.
His firm oversees $263 billion in assets. “If we can get some
clarity in Washington and if the economy continues to grow, I
think you’ll see more and more companies use M&A.”

Record corporate profits and cheap borrowing costs are
attracting buyers even as stock prices soar to a five-year high.
The S&P 500 is 2.8 percent below its record of 1,565.15 reached
in October 2007. The Dow is about 1.4 percent below its all-time
high of 14,164.53.

Earnings Season

About 73 percent of the 388 companies in the S&P 500 that
have released results so far in the quarter exceeded profit
projections. Sixty-seven percent have surpassed sales estimates,
according to data compiled by Bloomberg.

Cisco Systems Inc. slipped 0.7 percent to $20.99. The
world’s largest maker of computer-networking gear forecast
third-quarter revenue will increase 4 percent to 6 percent from
a year earlier, indicating revenue of $12.1 billion to $12.3
billion. Analysts on average predicted sales of $12.2 billion,
according to data compiled by Bloomberg.

MetLife Inc. retreated 2.2 percent to $36.69. The largest
U.S. life insurer said fourth-quarter profit declined 87 percent
on costs tied to lower interest rates and annuities.

Whole Foods

Whole Foods Market Inc. dropped 9.7 percent to $87.50. The
largest natural-foods store in the U.S. lowered its sales
forecast for fiscal 2013. Sales may increase as much as 11
percent in fiscal 2013, compared with a previous estimate for
growth of as much as 12 percent, Whole Foods said.

TripAdvisor Inc. fell 7.1 percent to $43.55. The online
travel-recommendation service spun off from Expedia Inc. said it
expects earnings before interest, taxes, depreciation and
amortization to grow at a percentage rate of “high single
digit” in 2013. The forecast “came in lower than expected,”
Anthony DiClemente, an analyst at Barclays Plc, wrote in a note.

Weight Watchers International Inc. tumbled 17 percent to
$44.91. The company forecast annual earnings of $3.50 to $4 a
share, compared with the $4.75 average estimate in a Bloomberg
survey of analysts.